Structure of investments by sectors ofeconomy. The trend of the important reduction of theinvestments in the rural economy (in 1996 they reduced by about 15%) remainseffective. The volume of the investments in transport reduced more than in thepreceding years. At the same time, the investments in the telecommunications,which, due to the short enough terms of repayment, remain attractive for boththe domestic and foreign investors, grew by almost 20%. The investments in theexpansion of the production and technology bases of the construction entitiesgrew, as well.

Fig. 2.19

Dwelling houses put into operation byenterprises and organizations of all forms of property(% of the relevant period of the preceding year)

The remaining unfavorable situation in theinvestments sphere resulted in the aggravation of the reproduction problems.The high rates of the investments insufficiency resulted in formation, in theproduction sphere, of the immense mass of the worn and obsolete fixed assets.As of today, the average ages of the machinery and equipment have exceeded12 years; most of the Russian industry fixed assets are obsolete and operatedbeyond the limits of the economic expediency. According to experts, as oftoday, the market really requires only 50% to 55% of the fixed assets; theremaining need to be replaced due to the wear and obsolescence.

The economic situation in the investmentssphere can be defined as the new stage of the system crisis, relative to thetransformation of the fixed capital reproduction model towards the improvementof the internal balance of the finances, materials, and equipment flows, aswell as the employment reduction and inter-industry flows of the investmentsand labor, dismantling of the unloaded production capacities and unprofitablefacilities.

2.5. External Trade

The Russian external trade remains the onlysector of the Russian economy showing a stable growth in the latest years.Having survived the deep crisis after the disintegration of the Comecon andUSSR, the external trade turnover or Russia began growing. In 1996, it reachedUS$ 148.1 bn, including the US$ 113.7 bn for the FSU (the growth of the tradeturnover for both the foreign countries and the FSU amounted to the annual4%).

The evolution of the external economicactivities is, as before, influenced by both the reached results and the newlyappearing positive trends; however, the numerous problems in this field affectit, as well.

Among the factors stimulating the foreigneconomic activity are the already implemented measures stimulating the foreigntrade, and the expanded participation of Russia in the multilateral cooperationorganizations. The favorable conditions in the world feedstock markets alsobecame the external factors favoring the expansion of the Russian export (seTable 2.33).

Fig. 2.20

Source: Russian Goscomstat

Table 2.33

Average world market prices(US$/unit)

1994

1995

1996

Crude oil,mt

112

120

150

Natural gas, thousm3

70.6

80.4

80

Gasoline,mt

165

169

175

Diesel fuel,mt

152

154.8

182

Aluminum,mt

1910

1785

1510

Copper, mt

2951

2888

2552.9

Nickel, mt

8768

8512

7515.2

Source: center for EconomyConjuncture

The foreign economic relations are sloweddown by such factors as:

- low competitiveness of the domesticindustrial products; it is impossible to improve it during the nearest yearsdue to the critical financial situations of most entities of the processingindustry and enterprises under conversion;

- growing production transport costs. Thespecific costs of the enterprises, taking into account the expendituresrelative to the export, have already exceeded, for numerous goods, the exportprices, including the rolled ferrous metals, steel pipes, primary aluminum,refined copper, nickel, and polyethylene by 15% to 32% for the foreign ccountries; for the FSU countries (taking into account the VAT) the relevantfigures reach 32% to 70% for the primary aluminum, refined copper, nickel,polyethylene, and mineral fertilizers.

For certain goods, the wholesale priceshave, already, exceeded the world market ones (world exchanges prices, worldquotations), including the 15% to 40% for the reinforcement and hot rolledsteel, refined copper, tin, zinc, and polyvinylchloride; the prices approachedor equaled the ones for the cold rolled steel, polyethylene, andpolystyrene.

the dynamics of the contractual exportprices for the fuel and power goods and media was adequate when reflecting theworld market prices. However, for numerous goods, the export contractual pricesstay lower than the ones of the world market. E.g., the prices for thereinforcement steel, refined copper, coal, polyethylene, polystyrene,polyvinylchloride, the contractual prices are lower than the world market onesby 3% to 18%; this results in the important loss of profit and hard currencyincomes (see Table 2.34).

Table 2.34

Average export prices for main RF goodsexport (without CIS) (US$/unit)